Since the financial crisis, family businesses remain wary of taking on too much debt. Simultaneously the credit crunch in the last decade has pushed family businesses towards non-banking channels to raise capital. A 2014 KPMG International survey showed that 58% of family businesses are currently seeking external financing to fund their investment plans.
Crowdfunding, as opposed to mini-bonds or crowdlending, comes in two main flavours: so-called rewards crowdfunding, where backers are pre-sold products or services so that entrepreneurs can raise enough capital to start to launch their business concept; or equity crowdfunding, where backers receive private shares in exchange for pledges.
In the US, where mini-bonds are yet to gain a foothold, crowdfunding has been a popular source of capital-raising for many startup entrepreneurial ventures as well as small family businesses. So far the record for the highest crowdfunding campaign has been $88.3 million raised by a video game developer, Chris Roberts, with over 972,000 backers. The Veronica Mars movie based on the popular TV show met its funding goal in 10 hours and ultimately raised $5.7 million, while a campaign to launch a card game featuring exploding kittens garnered $8.8 million in backing.
However, according to Forbes, the average successful crowdfunding campaign is only around $5,000. Hence while crowdfunding might not be a suitable capital-raising tool for large family businesses, smaller firms or entrepreneurial ventures could well benefit from a crowdfunding strategy.